Independent broker-dealers and registered investment advisors are continuing to channel investing dollars into passive investment products, to the tune of more than $13 billion in net new ETF assets for the first quarter.
That's according to data from Broadridge Financial Solutions, Inc., which said that individual investors have also increased ETF holdings with another $3.7 billion of net new ETF assets coming from the discount brokerage channel during the first quarter. The wirehouse channel was the only retail channel with negative net new ETF flows during the first quarter, with a decrease of $13 billion.
Looking at ETF and long-term mutual fund net new assets by channel, said Broadridge, helps to better gauge asset velocity (movement of assets within a defined period) for third-party distributors.
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And while long-term mutual funds and ETF net new assets were only down slightly during the first quarter, Broadridge measured asset movement throughout the three-month period and found that the RIA channel ended the quarter relatively flat in overall net new assets, while experiencing monthly asset fluctuation three to four times higher than in the past four quarters.
While ETFs have been experiencing substantial growth, their presence in the defined contribution market has lagged their popularity elsewhere. However, a considerable portion of ETF growth, according to Broadridge, is likely due to a migration from mutual funds.
In Q1 2016, the company said, overall ETF assets increased by 2.4 percent to $2.3 trillion, but net new assets decreased by 0.68 percent, a decrease of $15 billion. Net new flows for long-term mutual funds showed a similar pattern, with total assets from third-party financial intermediaries increasing by 1 percent to $7.3 trillion in Q1, but with a decrease of net new assets of $11 billion. The IBD channel saw the biggest decline in long-term funds, decreasing by nearly $37 billion in net new assets in the first quarter, indicating that much of the gain in ETFs was likely coming from mutual funds.
Net new assets of ETFs for retail channels—RIA, IBD, wirehouse and discount B-D—were up by $3 billion in the first quarter, while net new assets for institutional channels—private bank, bank and trust—were down by $18 billion. Net flows for retail ETFs were up by $3 billion, versus a decrease of $43 billion for retail long-term funds.
Net new flows for retail long-term funds were down by $43 billion, while institutional long-term fund net flows increased by $32 billion. Retail ETFs saw increased assets across fixed income, alternative and commodity products, while equity, convertibles and allocation product assets were down. Retail channels saw decreased assets in all major investment categories during the first quarter, with the exception of commodities.
"Our analysis indicates the volatility in the markets during the first quarter of 2016 resulted in increased velocity of money being reallocated within client portfolios," Frank Polefrone, senior vice president of Broadridge's data and analytics business, said in a statement.
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